Medtronic Reports
Looking over the results released this morning by Medtronic (NYSE:MDT) and listening to the call that accompanied the results Diabetic Investor is beginning to wonder whether the company remains committed to staying in the diabetes device business. Looking over the results for their diabetes unit it’s becoming pretty obvious the company is feeling the dual effects of greater competition and an aging core product line.
Try as they might to talk up their CGM business, the fact is for the core franchise of insulin pumps and pump supplies the company is fighting for every dollar. A unit which was growing at over 50% quarter over quarter has now become a rather lifeless unit that’s barely growing in the low single digits.
Given Medtronic’s fondness for new technology, an addiction common to the entire diabetes device industry, one just might think they would talk up their new line of insulin pumps. In case you’re wondering what new line of pumps, the company last year announced they were working on a replacement for the Paradigm line of insulin pumps as well as patch pump. Considering that sales are flat and the competition continues to capture a greater share of both new pump placements and pump upgrades perhaps it might not be bad idea to discuss just what the company plans to do.
Perhaps one reason the company remains mum on this “new” line of pumps is their really not sure what these new products will look like or when they will get here. We already know their patch pump has been delayed, yet again. A product that has now undergone four design changes and likely will be delayed even longer than anticipated. All the while the folks at Insulet (NASDAQ:PODD) continue to pick the low hanging fruit off the patch pump tree making Medtronic’s task just that much more difficult should their patch pump ever get here.
Also watching this Keystone Cop routine with great amusement are the folks at Animas who continue to gain share in the conventional insulin pump market. The company knows that fairly soon they will be able to compete head on with Medtronic when their pump/CGM combo comes along. Like Insulet, Animas also has an agreement with Dexcom (NASDAQ:DXCM) to integrate the Dexcom CGM with the Animas insulin pump. Once this product comes along patients who use these systems will have another reason to switch from Medtronic to the competition.
Besides dealing with their competitive issues, the company is also bracing for the upcoming FDA panel meeting. As Diabetic Investor has previously reported we expect the FDA to go hard at the company and recent events have made this scenario even more likely. Privately the folks at Medtronic are beginning to wonder what’s worse; facing an angry, out for blood FDA panel or having root canal work without novacaine. Right it’s a 50/50 split between the two options and root canal is gaining fast.
Even when the FDA panel is done exacting their pound of flesh, the company must still deal with the new 510K rules and an administration bent on exacting their retribution from the medical device industry. Needless to say these are aren’t exactly the conditions Medtronic expected back when they bought MiniMed.
Diabetic Investor, for one, would not be all that surprised if the company decided to just exit the diabetes device arena altogether, that is assuming they can find a company crazy enough to buy the unit. As badly as the company has managed this unit the fact remains they are still the undisputed market leader and if run correctly the unit has the ability to generate some very nice profits. To Diabetic Investor this is the most amazing aspect of whole situation, that a company could do almost everything wrong and still maintain such a dominate market position. If this fact alone doesn’t tell everyone something about the insulin pump market nothing will.
